Student Loan Overhaul Heading Toward Vote With Health Care Bill

It's been pushed to the background by the health care debate, but an impending overhaul of the student loan program is almost as important to the parents of college-age children.

Legislation that would largely remove private banks from the loan process and increase Pell Grants for the economically disadvantaged from $5,350 annually to $5,975 could be voted on in the House as soon as Sunday, possibly in a package with health care legislation. The change is a high priority for the Obama administration.

"With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions," said Rep. George Miller, chairman of the House Education and Labor Committee.

Miller, a California Democrat, said the bill "offers the most sweeping changes in a generation" to the 45-year-old federal program, the New York Times said.

The idea is to take out financial institutions as middlemen in the process, thereby saving the government $61 billion in the next decade that would have gone for subsidies to guarantee the bank loans against default. Instead, if the bill passes, the government would expand its own lending to families of college students, with interest rates remaining about the same.

The Times said the banking community has lobbied hard against the legislation, calling it an unnecessary government takeover of a successful private-sector program.